Checking in with one of Cincinnati’s top investment advisers on where stocks are headed

The stock market has been hitting all-time highs, even as investors keep wondering when the party will end. I sat down with Matt McCormick, a portfolio manager at one of Cincinnati’s biggest investment advisory firms, Bahl & Gaynor, for lunch at the Moerlein Lager House to talk about stocks, other investment topics and our shared affinity for visiting Door County, Wis. (where my hometown lies), in the summer.

Where do you see the stock market heading the rest of the year? Is it getting overpriced?

It doesn’t matter what we think. It matters what Ben Bernanke thinks. All eyes now are on whether he’ll taper or not. I think the market will be choppy the rest of the year. The market is rising because they think the Fed will continue to pump. Right now, 90 percent of the market thinks they’ll taper in September. The rest thinks it’ll be October. The Fed has been the dominant force behind the market’s growth since ’09. We think people should be conservative.

What investments do you like at this point?

You already know that we like dividend growth stocks. Dividends are real; you can’t fake them. It’s not just big yields. We really like tech. A lot of those companies are exhibiting good earnings growth. Locally, Procter (& Gamble Co.) had good earnings. (New CEO) A.G. Lafley is not going to sit on his hands. He’ll do something. In tech we like Qualcomm, and we’re buyers of Apple. I like the regional banks, too: U.S. Bank, Cullen/Frost, BB&T. I would avoid utilities, telecom and the money center banks.

Where do you expect the market to be at year-end?

It’s up 20 percent so far this year. If you say there would be more volatility and it’ll end the year up 15 percent, do you think anyone would complain? I would not be surprised to see the market down 3 to 5 percent the rest of the year. I think the market is a little extended. What investors should do is start playing with the house’s money. Take a little money off the table in stocks with big returns and invest in high-quality stocks.

What kind of fallout for the industry do you expect as a result of Ponzi scheme allegations involving Glen Galemmo?

The end result of this is there’s going to be more regulation. You’re going to have more honest people filling out more forms that regulators apparently don’t look at because they should have caught this one.